In 2013, two friends, Billy Markus and Jackson Palmer, felt that the cryptocurrency industry was taking itself too seriously. Inspired by the "Doge" meme circulating the internet at the time, they created a token called Dogecoin (DOGE +0.45%), which like-minded investors could buy for a bit of fun.
Although Markus and Palmer created Dogecoin as a joke (in their own words), it wound up amassing a staggering $90 billion market capitalization in 2021. It lost the bulk of that value a year later, and it has since taken investors on a wild roller-coaster ride. It soared by 252% in 2024, outperforming other major cryptocurrencies, but it's down 52% so far in 2025.
Dogecoin is struggling to find a use case that can create real value over the long term. Meanwhile, it faces a structural supply issue, which could keep a lid on further gains. Is this year's dip a buying opportunity for investors? The answer couldn't be clearer.
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Dogecoin's fundamentals are on shaky foundations
There are thousands of cryptocurrencies on the market today, but only a small handful have legitimate use cases. XRP, for example, is used as a bridge currency in the Ripple Payments network. Then there is Ether, the native cryptocurrency of the Ethereum network, where developers build decentralized software applications.
Dogecoin has no practical use case. Like most cryptocurrencies, it isn't very popular for making real-world payments because of its extreme volatility. In fact, according to crypto directory Cryptwerk, just 2,126 businesses worldwide accept it as payment for goods and services. If consumers can't spend their tokens at their favorite stores, they have no reason to own them.
Dogecoin's past rallies were instead fueled by speculative investors, which is why they haven't been sustainable. Tesla CEO Elon Musk helped drive Dogecoin to an all-time high of $0.73 per token in 2021 by promoting it on social media, and even during his appearance on Saturday Night Live in May of that year.
However, investors quickly realized he had no concrete plan to develop a true use case for Dogecoin, so the token lost more than 90% of its value by mid-2022. The Musk effect resurfaced in late 2024 when President Donald Trump appointed him to lead an external government agency tasked with reducing wasteful spending to help lower the national debt. It's called the Department of Government Efficiency, or DOGE for short, which is a reference to Musk's favorite cryptocurrency.
This fueled Dogecoin's 252% rally last year, but once again, the enthusiasm fizzled out once investors realized no true value was being created.
Dogecoin's structural supply issue could cap further upside
A lack of adoption is just one issue preventing Dogecoin from realizing further upside. In the longer term, even if the token finds a legitimate use case, its supply problem could still weigh on its price.
Dogecoin transactions are verified through a process called mining, which involves using powerful computers to solve complex equations and add new blocks to the blockchain. Miners are paid rewards in Dogecoin, which means new tokens are constantly entering circulation. Bitcoin uses a similar function, except with one key difference.
There are 151.8 billion Dogecoin tokens in circulation as I write this, and although there is a cap on how many can be mined each year, there is no end date. Therefore, new tokens will continuously enter supply until the end of time, diluting the holdings of all existing investors. Bitcoin's supply, on the other hand, has a hard cap of 21 million coins, and this perception of scarcity is one reason why the cryptocurrency continues to set new highs.
A limitless supply will only serve to drive Dogecoin lower over time. If we multiply Dogecoin's circulating supply by its current price of $0.16 per token, we get a market capitalization of $24.5 billion. When Dogecoin's supply inevitably doubles to 303.4 billion tokens, its price-per-token will theoretically need to halve to $0.08 in order for its market capitalization to stay the same.
Looking at this another way, if Dogecoin found a new use case that doubled its market capitalization to $49.6 billion, while its supply also doubled, investors would make nothing because its per-token price would stay exactly where it is today.
CRYPTO: DOGE
Key Data Points
Should you buy Dogecoin on the dip?
History suggests there could be more downside to come for Dogecoin. The token bottomed at $0.05 during its last crash in 2022, and given the magnitude of its current downtrend, that might be in the cards again. It implies Dogecoin could experience a further 68% downside from here.
The path of least resistance appears to be lower for Dogecoin at present, due to its lack of a fundamental use case, its ever-growing supply, and an apparent decline in investor sentiment. As a result, its 51% dip in 2025 doesn't appear to be a buying opportunity to me.
